Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we look at the challenges of rebuilding an office in one of America’s hottest legal markets. Sign up to receive this column in your inbox on Thursday mornings.
Willkie Farr & Gallagher entered the Houston market in 2014 with three partners: Bruce Herzog, Michael Piazza and Angela Olivarez.
All three walked away in different directions over the past 60 days. Herzog went to Latham & Watkins, Piazza to Gibson Dunn & Crutcher, and Olivarez to O’Melveny & Myers.
In total, Willkie’s Houston office has lost nearly 25 lawyers, including seven partners, over the past year, according to data from Leopard Solutions. That includes the loss of David Aaronson, a corporate partner who joined Willkie in 2015, made partner in 2020, and left on Wednesday for Orrick.
Willkie didn’t respond to a request for a comment.
If Willkie seeks to rebuild the Houston office—and there are early indications it intends to—it will do so at a greater cost than it faced eight years ago.
All but one of the country’s 15 largest law firms by revenue now has an office in Houston. Instead of competing mostly with local firms for the city’s top lawyers as it did in 2014, Willkie will be lined up against many of the largest, most profitable firms in the US.
Latham & Watkins, credited as the first national firm to crack the once-insular Houston market, has around 100 lawyers in the city.
Kirkland & Ellis, in what its chairman called its biggest investment, grew to more than 300 lawyers in Texas and became the largest US law firm by revenue.
Sidley Austin has more than 85 lawyers in Houston after opening in 2012 and becoming a significant competitor for energy industry deal work.
Gibson Dunn, which opened in Houston in 2017, is the most recent national firm to successfully enter the top tier of Houston’s transactional practice.
When Willkie launched the Houston office in 2014, it counted on its strong ties to the private equity market, which was pouring money into the booming Texas energy sector and fueling growth in law offices in the area.
The firm wanted to marry its private equity industry experience with lawyers who had the local specialty of working on oil and gas and other energy industry deals.
“By creating a robust office in Houston, we will be able to expand our services to those who value the combined resources of our corporate franchise and the skills of attorneys steeped in energy projects,” Thomas Cerabino, chairman of the firm, said in a statement at the time.
Herzog, Piazza and Olivarez seemed to fit that strategy perfectly.
Herzog had joined Willkie in 2008 from Vinson & Elkins and moved to New York, where he serviced a roster of private equity clients. He led the charge to open in Houston while splitting time between New York and the new office and serving on the executive committee.
Piazza, joining at the launch of Willkie’s new office, provided the oil and gas expertise he’d built up while working at Bracewell, one of the traditional Texas firms that had been doing those deals forever.
Olivarez came over from Jones Day, where she handled M&A and capital markets transactions concerning energy businesses and investment banks.
Herzog, Piazza and Olivarez didn’t respond to messages requesting comments.
The Houston office grew to about 55 lawyers at its height, and it was profitable. But the energy industry deal flow envisioned at the start largely failed to materialize.
From 2015 through the end of last year, Willkie worked on 12 M&A deals involving Texas-based energy companies, data compiled by Bloomberg show.
By comparison, Kirkland, which opened a Houston office the same year as Willkie, advised on nearly 10 times that many. Latham & Watkins worked on more than 90.
Even so, there are signs Willkie remains committed to growing in Houston.
Last year, the firm made three partners in Houston out of 31 across the firm. This week, it hired Kris Agarwal, a well-known private equity lawyer who has spent the last decade-plus as a general counsel, first at Lime Rock Partners and then at Platinum Equity.
But the departures and deal data show that rebuilding an office in one of the most important and competitive markets in American law will be a difficult task.
Worth Your Time
On Kirkland and Cravath: Kirkland hired Cravath dealmaker Allison Wein this week, Meghan Tribe reported. It comes on the heels of Cravath’s decision to modify its tenure-based compensation system. And it mirrors an episode from 2017 at Freshfields in London. The firm lost private equity star David Higgins to Kirkland shortly after modifying its pay structure to reward the top performers.
On McDermott: McDermott Will & Emery hired Marshall Brozost, the former head of Orrick’s New York real estate practice, in Manhattan, Meghan reported. In related real estate moves, the firm also hired Orrick partner Alykhan ‘Aly’ Shivji, Morrison & Foerster’s Billy Hildbold and Kirkland & Ellis partner Justin Bender.
On SPACs: Bloomberg News reported a handful of major investment banks are stepping away from SPAC deals, marking a serious blow for a market that helped propel Big Law firms to great financial heights during a two-year boom.
That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.